Construction Finance or Project Finance is a unique offering under which Banks/ NBFCs directly finances real estate developers for projects they are developing. This product comes with customized offerings built around real estate developer’s project acquisition and construction cost basis a detailed evaluation of the project by the Banks/ NBFCs. Banks focus in Construction Finance is primarily on financing residential projects which give fillip to retail mortgage business. Corporate & Realty Finance (CRF) offers financial assistance to Developers and Builders in the Residential, Commercial and IT sectors.
Construction finance helps to finance the developers/ builders for the project acquisition and construction cost. The major project related parameters are:
Construction Finance cum Lease Rental Discounting ("CF cum LRD")
CF cum LRD loans are offered to developers who are constructing commercial property and the same is to be leased out on completion. Amount of loans is determined by discounted value of future rent cash flows. Loan is disbursed linked to progress of project and amortization starts post completion. Lease Rental Discounting ("LRD")
CRF also undertakes LRD proposals for completed projects of large quantum
CF cum LRD & LRD proposals would have a floating rate pricing linked Bank / HFC Prime Lending Rate with a monthly reset. Bank / HFC would offer differential pricing during construction period and after project completion or lease tie up. The typical tenure of these loans are 6 to 9 year depending on Developer, Project and lease tie up arrangement.